Gold Extends Gains for 2nd Week

Gold rose above $4,380 an ounce on Friday, recovering from earlier losses and securing a second consecutive weekly gain as investors assessed the outlook for US monetary policy. Recent US CPI and PPI data showed inflation pressures remaining contained, suggesting that the impact of higher energy prices linked to the Iran conflict eased in July and reducing expectations of an aggressive Federal Reserve stance. Markets now see roughly a one-in-three chance of a rate hike in September, although upcoming employment data and comments from Fed Chair Kevin Warsh at the Jackson Hole symposium could influence expectations. Geopolitical risks remain another key factor, as renewed tensions could push energy prices higher and revive inflation concerns. Meanwhile, strong central-bank demand continues to support gold, with China adding around 20 tonnes to its reserves in July, marking its 21st consecutive month of purchases.

Gold fell below $4,350 an ounce on Friday, extending losses from the previous session as investors locked in profits while assessing the Federal Reserve’s policy outlook and developments in the Middle East. Data released Thursday showed US core producer prices increased less than expected in July, offering further evidence that inflationary pressures are not broadly intensifying following Wednesday’s subdued CPI report. The softer price data reduces pressure on the Fed to raise interest rates in the near term, with markets now pricing in around a 35% chance of a 25 basis point rate hike in September, down from 55% a week earlier. Meanwhile, diplomatic efforts to reopen the Strait of Hormuz remain deadlocked, keeping investors cautious over the risk of an escalation that could drive energy prices higher and reignite inflationary pressures.

Gold fluctuated around $4,400 an ounce, remaining close to a 10-week high as softer US inflation data reinforced expectations that the Federal Reserve will leave interest rates unchanged next month. US producer-price inflation eased more than expected in July, helped by lower energy and food costs, providing further evidence that price pressures are not broadly accelerating. However, renewed tensions in the Middle East remain a risk, as any disruption could push energy prices higher and revive inflationary pressures. Oil is heading for a weekly gain as traders continue to monitor efforts by the US and Iran to end the conflict and reopen the Strait of Hormuz. Gold has also benefited from stronger investor demand and continued central-bank purchases, with China adding around 20 tonnes to its reserves in July, marking the 21st consecutive month of accumulation. Globally, central banks purchased an estimated 289 tonnes of gold in the second quarter.